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In this commentary, Kate Probst discusses the state of funding for the cleanup of polluted sites under EPA's Superfund Program. The topic is especially timely, given debate about whether to reinstate dedicated taxes for the program to supplement general revenue sources and, potentially, increase program funding.

With Democrats back in power in both Congress and the White House, there is a renewed effort to reinstate the taxes that once stocked the Superfund trust fund. While proponents argue that the taxes are critical to ensuring that the “polluter pays,” the reality is a little more complicated. Two questions are always raised in this perennial debate:

Does EPA need more money to pay for Superfund cleanups? The unequivocal answer is “yes.” And,

Should the taxes that once stocked the Superfund trust fund be reinstated? But here the answer is “maybe.”

While it has been nearly 30 years since the law was first implemented, there are still sites contaminated with hazardous substances that need to be cleaned up. To date, 1,596 sites have been placed on the EPA’s National Priorities List (NPL), all highly contaminated sites where trust fund monies can be used to pay for cleanups. While construction of the proposed remedy is completed at the majority of them (1,065), more work remains to be done at fully one-third (531).

Just because implementation of the remedy is complete does not mean that cleanup goals at the site have been achieved. At many sites, long-term operation and monitoring activities will continue for years, if not decades, requiring government oversight. And, the percentage of sites where remedies are implemented—and paid for—directly by those parties responsible has been decreasing. For much of the 1990s, private parties paid for 70 percent of site remedies. By FY 2008, this figure had fallen to 56 percent. While it would be nice to think that we no longer need the Superfund program, this simply is not the case.

But first, a little funding history. The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)—better known as “Superfund”—put in place two mechanisms for ensuring the cleanup of sites contaminated with hazardous substances: broad liability provisions to require the “responsible parties” to pay for and implement cleanups themselves and a dedicated trust fund to provide funds for the government to clean up sites where those responsible did not have needed funds, had gone out of business, or were recalcitrant.

For the first five years of the program, total appropriations were $1.6 billion, and the majority of the funds came from excise taxes on petroleum and chemical feedstocks, plus additional funding from general revenues. When Congress reauthorized the program in 1986, annual appropriations were increased to $1.6 billion, thus quintupling the size of the program. Congress added a third tax to generate revenues for the Superfund trust fund, the corporate environmental income tax, which was based on every corporation’s modified alternative minimum taxable income. Many different kinds of companies paid this tax, not just the chemical and petroleum companies subject to the excise taxes.

When authority for the Superfund taxes expired at the end of 1995, annual appropriations for the program did not decrease immediately, because of a large unobligated balance in the trust fund. Appropriations continued at approximately $1.5 billion through FY 1999. Annual appropriations declined to $1.2 billion in FY 2003, where they have pretty much stayed ever since.

But by the late 1990s, it was clear that EPA was experiencing a shortfall in funds needed for cleanup. Work by Resources for the Future in 2001 estimated a “best case” funding shortfall of just over $2 billion over the 10 years from FY 2000 through FY 2009. In the years since then, EPA’s Office of the Inspector General and senior EPA officials have documented funding shortfalls that have prevented remediation from moving forward at a host of specific sites. The number of sites each year where cleanup activities are completed—which reached a high of about 80 sites per year in the late 1990s—fell to 47 in FY 2001 and to an all-time low (not counting the first few years of the program) of 24 in FY 2007.

While fewer sites are being added to the NPL each year—in FY 2008, only 18 new sites were added—the funding shortfall is likely to continue for the foreseeable future. Just how big this deficit is, and how long it will continue, is unknown as there have been no comprehensive estimates of funding needs made public since the RFF report that was released eight years ago.

In addition, it has become clear that some of the sites that warrant federal attention—mining sites and contaminated waterways —are among the most complex and expensive types of sites to remediate. No public estimates exist regarding how many of these sites will likely be placed on the NPL in the future.

To Tax or Not to Tax?

Supporters see reinstating the expired Superfund taxes as a way to increase funding for cleanups. And when the trust fund was flush, appropriations were certainly higher. According to the U.S. Government Accountability Office, from 1981 through 1995 taxes accounted for about 68 percent of trust fund revenues. From fiscal year 1996, when the tax expired, through 2007, however, taxes accounted for just 6 percent of all trust fund revenues.

But in these difficult economic times, it is worth asking whether it makes sense to reinstate one, two, or three distinct taxes—with their attendant transaction costs—to raise what is, in fact, a miniscule amount of funding in the overall federal budget.

What, then, about the argument that reinstating the taxes will ensure that the polluter pays? While this sounds good, it really does not hold water. It is true that the Superfund taxes are paid by private industry, and that a large percentage of the taxes are levied on corporations that produce hazardous chemicals and substances that contaminate the environment. And, in some cases, it is likely that the companies paying the taxes did contaminate sites and groundwater, and may well have sites that have been—or will be—cleaned up either through federal enforcement actions, or because they are on the NPL.

However, clearly those companies that contaminated sites and are now out of business will not be paying Superfund taxes in the future. And many companies that will pay the taxes include entities already being held liable for cleanup and are paying directly for site-specific activities.

Before seeking to reinstate the Superfund taxes, Congress should focus on figuring out the program’s real funding needs. Sadly, the questions that need to be asked—and answered—today are much the same as those Congress asked RFF to address 10 years ago:

How much will it cost to cleanup those sites already on the NPL?

How many and what kinds of sites are likely to be added to the NPL in the near future?

What are the likely costs of “post-cleanup” activities for NPL sites?

With a new administration in the White House and at EPA, it is time to increase the transparency of the Superfund program. EPA should, on its own, commit to again preparing an annual progress report on the Superfund program that clearly lays out past accomplishments, future challenges, and future funding needs. To ensure the integrity of this effort, EPA should create an outside review panel to review the proposed data and methodologies before the analysis is conducted, and also review the interim results and final report.